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EIA's Short-Term Energy Outlook Shows Decrease in Natural Gas Prices

WASHINGTON — The Energy Information Administration (EIA), the government's energy statistical arm, released its short-term energy outlook Aug. 12, reporting a slight decrease in the price of natural gas as well as gasoline and diesel fuel.The Henry Hub spot price of natural gas averaged $11.45 per Mcf in July, which is $1.62 per Mcf below the average spot price in June. The spot price decline marks the end of consecutive increases in the monthly average price that began in October 2007. While warmer-than-normal weather in July increased natural gas demand in the electric power sector, the decline in crude oil prices and continuing supply growth contributed to the decline in natural gas prices in the past month, the EIA report says.Total natural gas consumption is expected to increase by 3% in 2008 and by 1.7% in 2009. Spot prices are expected to remain below $10 per Mcf until December, when space-heating demand rises. On an annual basis, the Henry Hub spot price is expected to average $10 per Mcf in 2008 and $9 per Mcf in 2009.The recent fall in crude oil prices has decreased retail prices for both gasoline and diesel fuel. The weekly price of regular-grade gasoline, which peaked at $4.11 per gallon on July 14, averaged $3.81 per gallon on Aug. 11. Diesel fuel fell from $4.76 per gallon on July 14 to $4.35 on Aug. 11. Annual average gasoline prices are projected to be $3.65 in 2008 and $3.82 per gallon in 2009, compared to $2.81 in 2007. Diesel prices are projected to average $4.18 in 2008 and $4.27 per gallon in 2009, compared to $2.88 in 2007.Despite warmer-than-usual temperatures, particularly along the East and West Coasts, milder temperatures forecast for August and September compared to last year and low economic growth should limit growth in electricity consumption during 2008 and 2009 to an annual average of about 1.2%, EIA says.Many utilities are continuing to pursue retail electricity rate increases in response to rising power generation fuel costs during the last two years. For example, the delivered cost of natural gas to the electric power sector in March was $9.29 per million Btu, 25% higher than the average cost in March 2007.

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Jason Hicks was assistant editor for American Trade Magazines, which publishes American Coin-Op, American Drycleaner and American Laundry News, for more than nine years, and web editor for three years.